Questions Surround Mastercard-VocaLink Buy, For Faster Payments And Beyond

It’s a deal stretching into the hundreds of millions of dollars, unifying huge chunks of the infrastructure across the United Kingdom that enables faster payments. And could it all be rent asunder?

Mastercard, of course, is seeking to buy VocaLink, in a transaction struck this past July for about $920 million.

Now, the regulatory watchdog for the U.K., the Competition and Markets Authority (CMA), is looking at the transaction, stating Wednesday (Jan. 4) that several stakeholders across the payments industry have raised the alarm over competitive concerns. The CMA has concurred that the deal would, in one section of the payments arena, give the combined entity sway over contracts tied to the LINK ATM network, to which VocaLink provides software. That network, in turn, ties into as many as 70,000 teller machines located in the U.K.

A key concern raised by the CMA: By combining, Mastercard and VocaLink could “reduce the number of bidders and limit” LINK’s ability to gain bang for its buck when moving through the bidding and selection process that typically crowns an infrastructure provider. And infrastructure is just one way of guaranteeing faster payments along with more secure payments.

There’s just a few days — about a week, really — for the two firms to address the CMA’s concerns over these payments made between banks and offer up some sort of remedy. Otherwise, the CMA would likely widen its investigation. Should that happen, it’s a fair bet any closing would be pushed out. The most obvious answer, in reference to remedy, is for VocaLink to propose some divestitures, chiefly concerning LINK. That may or may not be enough to tamp down the concerns. And it is not unusual for some surgery to be done on wide-ranging mergers before completion.

While the initial headlines swirl over the LINK part of the deal, the focus extends beyond the consumers who typically cue up at the ATMs themselves. A larger, more in-depth antitrust investigation would perhaps raise other questions as things progressed. The issue of competition arises in a different way and brings up questions over the infrastructure that touches B2B payments via VocaLink. In short: If the deal goes bust, what might that mean for VocaLink’s stronghold there?

VocaLink also is the entity that runs Bacs, which is the clearinghouse for debit and credit payments between bank accounts in the U.K. It also runs Faster Payments, which enables mobile and online payments. While the investigation by the CMA found no concerns, competitively speaking, for Bacs and Faster Payments (only for LINK) — even as the former helps process as much as 90 percent of salary payments within the country — if a deal does not go through, could VocaLink face yet another round of scrutiny? As noted late last year, the U.K. Payment Systems Regulator suggested that there will be no pursuit of divestments from VocaLink to level the infrastructure playing field for payments systems (and yes, systems such as Bacs), chiefly due to the fact that Mastercard is buying VocaLink.